Friday, June 11, 2010

UK PM steps into fray to defend BP

(FT) -- David Cameron, the British prime minister, has leapt to BP's defence, emphasising the "economic value" the oil company brings to the UK and US, in a clear signal of British concerns over the rhetoric about the Gulf of Mexico oil spill.

The prime minister's intervention, marking a distinct shift of tone from his earlier support for the US stance, followed a day on Thursday of increasing City, media and political pressure to be more robust in responding to attacks on the British multinational.

BP chairman Carl-Henric Svanberg was summoned to meet President Barack Obama and other top officials at The White House next Wednesday. A letter from Admiral Thad Allen, head of the federal oil spill response, pointedly did not mention Tony Hayward, the embattled BP chief executive harshly criticised by Mr Obama.

Shares in BP plunged to a 13-year low and the cost of insuring its debt rose to a record high on Thursday, amid fears in financial markets the company might not survive the Gulf of Mexico crisis intact.

Adding to BP's difficulties, a government-appointed group of US scientific experts estimated the ruptured well may have been spewing oil at up to 40,000 barrels a day before last week's partial capping operation -- a figure far higher than previous estimates. It suggested up to 25,000bpd were still escaping despite the cap.

George Osborne, the British chancellor, said last night he had called Mr Hayward at Mr Cameron's request.

"The prime minister is clear that we need constructive solutions and that we remember the economic value BP brings to people in Britain and America," Mr Osborne said.

John Napier, chairman of Royal & SunAlliance, the UK insurer, wrote in a personal capacity to President Obama to accuse him of possible "double standards" in his "somewhat prejudicial and personal" criticisms of BP and its chief executive. "There is a sense here that these attacks are being made because BP is British," Mr Napier wrote. He said US banks had not suffered from the same personalised attacks in spite of the global economic damage caused by their "irresponsible, unchecked greed and avarice".

The White House on Thursday dismissed suggestions that it was too harsh on BP or that it risked damaging relations with the UK. "If anything, we have been called guilty for not being overly dramatic, for not showing flashes of anger," said Robert Gibbs, The White House spokesman. "I think the criticism that somehow we've been too harsh, I don't think that matches up with the reality or the rhetoric that we've used."

Senior British ministers had earlier also sought to play down suggestions of transatlantic tensions. "We need to be clear that BP needs to do everything it can to deal with the situation, and the UK government stands ready to help," Mr Cameron told reporters on a trip to Afghanistan.

Credit default swaps for BP, a form of insurance against the risk of the company defaulting on its debt, on Thursday reached levels that analysts said implied a junk credit rating. BP shares fell to their lowest since 1997, falling nearly 12 per cent on Thursday before closing at 365.5p in London, down 6.7 per cent.

© The Financial Times Limited 2010
 By Jean Eaglesham, Anousha Sakoui and Kate Burgess, FT.com

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